Healthful Appeal

Today's health-conscious consumers are seeking out natural and organic foods and beverages they can trust and afford.

An old saying contends, "You are what you eat." And these days, a growing number of health-conscious consumers are choosing not to eat foods that would, if the saying were to be taken literally, transform them into a jumble of pesticides, preservatives, artificial colors and artificial flavors.

'If a 12-year-old can't read and define an ingredient, don't put it into your food products.'

— Shannon Platt, sales and marketing manager, Blackberry Patch

That reality translates into increased demand for natural and organic foods and beverages. The all-natural arena, in particular, really is taking off across numerous categories. Even snack heavyweight Frito-Lay has been working to convert half of its snack portfolio to all-natural formulations by the end of 2011.

Organic foods, meanwhile, posted double-digit growth in the United States each year between 2000 and 2008, the Organic Trade Association reports. Although growth has slowed since then (7.7 percent in 2010), the segment continues to outperform the larger total food segment.

Natural high

Still, all-natural formulations seem to be the current darlings of mainstream grocery consumers across categories ranging from baked goods and beverages to sauces and snacks. And the shaky economy is somewhat responsible. According to David Rosenberg, food category manager for Bloomingdale, Ill.-based Now Foods, some consumers are shifting away from organics, which still tend to be more expensive than their all-natural counterparts.

"They don't want to give up the whole 'naturalness' in what they buy in their grocery shopping," he contends, "so they are kind of sacrificing the organics for natural."

David Browne, senior analyst for global market research firm Mintel International, notes that the natural segment gained market share from the organic segment across almost all departments between 2009 and 2011, citing Mintel/SPINS/Nielsen data for the 52-week periods ending in July of each year. He also believes the shift is related to tighter household budgets.

"This shift is most pronounced in refrigerated food, likely in part because key segments like dairy and eggs saw substantial price increases in 2010 and 2011," he says.

Unlike the term organic, on which the USDA places strict usage rules, the term all-natural really has no "official" definition. But common sense should rule here in new product development.

"While the FDA has not developed a definition for natural, it has not objected to its use if the product is free of artificial or synthetic ingredients or additives," notes Nima Fotovat, general manager of Shandiz Natural Foods, Markham, Ontario.

When it comes down to it, he says, consumers really are looking for a "clean" label. They want to avoid preservatives and artificial colors, flavors and sweeteners, but also desire shorter ingredient lists with recognizable ingredients.

Speaking of recognizable ingredients, Shannon Platt, who handles sales and marketing for Thomasville, Ga.-based Blackberry Patch, suggests retailers use the "12-year-old rule" when it comes to the development of all-natural store brand items.

"If a 12-year-old can't read and define an ingredient, don't put it into your food products," she says.

Other considerations also come into play, Fotovat says, including hormones, antibiotics, high-fructose corn syrup, trans fats and more.

"What the ingredient list has is also becoming as important as what it does not have," he says. "Consumers are increasingly looking for ingredients that are natural sources of nutrients such as fiber, protein and antioxidants."

Jim Wilsky, national sales manager for Tastemorr Snacks, Coldwater, Ohio, agrees.

"The additional health attributes and callouts on all-natural products are crucial to an increasingly aware consumer base," he contends.

What consumers are not looking for, however, is abuse of the term all-natural, Rosenberg stresses, suggesting retailers be very careful when it comes to their own brands.

"I think it's important for retailers to really have stricter standards of what all-natural means to them and to their shoppers, and really help define it — kind of be those gatekeepers for the shoppers," he says.

Organic still counts

Although economic conditions might be forcing less-committed organic shoppers to settle for fewer organic foods and beverages, or none at all, many core organic consumers simply are finding less-expensive ways to continue to eat organically, Fotovat says. This group has ensured steady growth for the segment over the past several years.

Some organic categories also are faring better than others, he notes, pointing to baby food as one of the stronger-performing organic food categories.

Organic items also perform better in areas in which consumers perceive the most benefit, Rosenberg says. He points to produce, dairy and cereals and other grains as high areas of consumer interest — and potential opportunity areas for store brands.

Fotovat concurs, adding meat and poultry to the list.

Breaking it down into smaller categories, Browne points to energy bars and gels; coffee, coffee substitutes and cocoa; and packaged fresh produce as today's fastest-growing categories within organic. And even though dairy is a hot organic area, natural yogurts are greatly outperforming organic yogurts.

"I think in some cases, it's the price/value proposition that is causing this," he says. "Consumers are content with all-natural yogurt innovations, particularly the Greek-style yogurt, which is premium and costly to begin with, versus more expensive organic versions."

Speaking of cost, it's also hampering consumer acceptance of organics within the meat arena, Rosenberg adds.

"Going organic there tends to be a lot more expensive than conventional, so that price barrier is probably putting off a lot of adoption," he says.

Be trustworthy

Retailers that want to gain and keep consumers' trust will want to put just as much thought into the packaging for store brand natural and organic products as they put into the products themselves. In reality, store brands in this space have to compete with national brand items, Browne says, which often are packaged in eco-friendly/light-weighted packages and marketed as such. Responsible packaging, therefore, is important, as is front-of-package nutritional information.

"It sounds simple, but store brands that compete in the natural/organic space must also be transparent with label claims, nutritional content, etc.," Browne says. "Natural and organic consumers are a skeptical bunch, and they expect companies to try [to] deceive them."

Wilsky believes "high quality," "delicious" and "healthy" are attributes that should get equal billing on the product label.

"In my opinion, the health attributes and callouts on packaging have never been more important," he adds. "Depending on the overall theme of a package design, there are many equally successful ways to carry that message to the consumer."

If the product is organic (and includes the USDA Organic seal), Fotovat says, the packaging needs to reinforce not only the healthy nature of the product, but also the fact that the retailer is aware of the importance of sustainability.

"Things like using recycled board and non-toxic inks should also be considered," he says.

Come out of hiding

Attractive, informative and honest packaging can help build up consumer trust in relation to store brand natural and organic products. But consumers cannot trust what they cannot find.

Although the debate continues over placement of such items, with some retailers integrating the items alongside conventional products and others dedicating a separate area to them, Fotovat believes dual placement is ideal. Of course, store size and format, shopper demographics and competitive dynamics also should factor into the decision.

Retailers with a segregated section and a comprehensive store brand lineup here especially should consider dual placement for key categories such as child-oriented products, he adds, to expand the brand's user base.

Whether they integrate natural and organic items with conventional products on the shelf or dedicate a special aisle or section to them, Rosenberg stresses that retailers must make the products identifiable. And when it comes to organics, in particular, retailers really need to be dedicated to the products.

"If it looks like there are just a few items such as carrots and oranges out there, then nobody's going to touch it," he contends. "I think it's important to be consistent throughout the store to identify what's organic, what's all natural."

In addition, retailers must support these premium products with cross-merchandising and promotions, Platt says, and get them into shoppers' mouths so they can taste them.

And a good story also can help attract attention to store brand natural and organic products, Rosenberg asserts, noting that many of the manufacturers behind these products have a great story to tell — whether it is related to small-batch production, a dedication to the environment or another positive.

In addition, retailers should consider opportunities to tie store brand natural and organic products in with health-oriented community events such as marathons, local charity events and monthly awareness events, Wilsky says.

"There is a much larger investment to be gained by the retailer in the areas of community involvement and gained customer loyalty that surrounds these types of events," he says. "The ultimate worth of these goes well beyond marketing and sales, though. Retailers have the opportunity to civically make a difference and do good things, for good reasons, for the communities they are part of."